Amazon faces loss as online sales dip

Due to reduced online sales and a drop in the value of its investments in electric car company Rivian, Amazon has posted its first quarterly loss since 2015.

The e-commerce behemoth’s online sales fell 3% in the first three months of the year, as the pandemic’s boost to its company begins to fade.

Meanwhile, Apple has warned that interruptions in China may cost the company up to $8 billion (£6.4 billion).

Both companies are dealing with supply chain challenges as well as the effects of the Ukraine conflict.

Other elements of Amazon’s business, such as cloud computing and advertising, continued to grow rapidly.

The corporation reported a $3.8 billion loss, mostly owing to a $7.6 billion loss on the value of its Rivian holding.

Rivian is owned by Amazon, who invested in the firm in 2019 with ambitions for an electric delivery fleet. Amazon holds a nearly 20% investment in the company. However, as the firm struggles to ramp up production, the stock price of the electric car producer has more than halved since the beginning of the year.

Overall, Amazon expects sales to climb by as little as 3% in the next months, a significant decrease from the double-digit growth it has experienced in previous years, even before the epidemic.

“The epidemic and ensuing conflict in Ukraine have brought unprecedented growth and difficulties,” said Andy Jassy, Amazon’s CEO.

He also mentioned that the corporation was dealing with rising prices as a result of “ongoing inflationary and supply chain challenges.”

As trading began in the United States on Friday, Amazon’s stock plunged 12%.

The company’s overall revenues increased by 7% year over year to $116.4 billion, thanks to Amazon Web Services (AWS), the company’s cloud-computing business and consistent profit generator.

Revenues from AWS increased by 37% year over year, while advertising income increased by 23%.

However, growth slowed significantly elsewhere, particularly in its overseas sector, where sales fell 6%.

Expenses are also fast increasing, with inflation adding $2 billion to costs in the first quarter.

In the face of labor shortages, the corporation has raised salaries to attract workers, and it is also facing a growing push in the United States to allow workers to form unions.

Meanwhile, rising gasoline prices have increased the cost of delivery.

Amazon has previously announced that the price of its Prime membership, which provides subscribers with privileges such as quicker shipping, will be hiked for US users, citing rising salary and shipping expenses.

Apple’s stock also fell as investors fretted about a probable supply chain disruption in the coming months.

Sales increased by 9% to $97.3 billion in the second quarter, while profits increased by more than 10% to $25 billion.

In a conference call with investors, management were less upbeat, noting a “difficult macroeconomic climate.”

Due to interruptions in global supply networks, the business predicted a $4 billion to $8 billion drop in revenues in the three months ending in June.

“We are not immune to these difficulties,” CEO Tim Cook said, “but we have great confidence in our staff, in our goods and services, and in our approach.”

Covid-related plant closures in China, as well as chip shortages, are hampering the company’s ability to satisfy demand, according to Mr Cook. He went on to say that he was more concerned about supply concerns than about purchasers cutting back on spending.

After shutting down Shanghai’s financial and manufacturing powerhouse, Chinese officials are attempting to limit a coronavirus epidemic in Beijing.

Mr Cook stated that Apple’s difficulties in China were “mainly focused” in Shanghai, but that the city’s infection rate has now decreased.

“Nearly all of [our] impacted final assembly factories have already resumed operations,” he added.

Companies that make Apple devices have been impacted by the increased number of Covid cases in China, with many briefly pausing manufacturing due to lockdown restrictions in recent weeks.

Pegatron, a major iPhone manufacturer, briefly halted production at two of its Chinese plants earlier this month.

Apple and Amazon are far from the only IT behemoths encountering difficulties.

As companies cut down on advertising because to mounting expenses and economic uncertainties, Facebook owner Meta posted its worst revenue increase in a decade earlier this week.

Netflix also said last week that its revenue growth has slowed significantly as a result of declining member numbers owing to fierce competition from rivals and rising living costs.

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